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Showing results for tags 'Earnings distributions'.
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An ESOP holds 30% of an S-Corp's stock and the owner holds the other 70%. I understand that distributions (not dividends since this is an S-Corp.) are often used to pay down the loan. One article I read says that distributions cannot easily pass through to ESOP participants. However, this client doesn't want to pay down the loan or allocate it to participants. Instead, the company would rather use the distribution for other plan obligations -- perhaps to liquidate the shares of retiring employees or for plan expenses, for example. I'm looking for something that definitively tells me that that would be okay to do. I've looked through the BNA ESOP portfolio, thinking that surely that there would be a discussion about the earnings distributions there, but I didn't see anything. Can somebody point me in the right direction? Before amending the plan, I want to make sure that what they want to do is permissible.